LAREDO — At a meeting Wednesday to talk about mineral rights in connection with the state’s shale drilling boom, it didn’t take long for someone to quote famed oilman Jean Paul Getty.
“The meek shall inherit the earth,” Getty said, “but not the mineral rights.”
As battles crop up between surface landowners and mineral owners or oil and gas companies, it’s an adage that’s increasingly apt in Texas, where mineral rights trump surface rights.
Members of the Eagle Ford Task Force, which met Wednesday at Laredo’s La Posada Hotel, talked about everything from eminent domain fights and abandoned wells to dealing with potentially contentious situations where the surface owners don’t get a slice of the drilling royalties.
“There are a lot of hard feelings out there,” said Polly McDonald, acting executive director of the Railroad Commission of Texas. She noted that most oil and gas companies never have a conflict with the surface owner. But the commission often hears complaints in cases where the owners don’t have mineral rights or are dealing with a new pipeline but don’t have the benefit of production on their land. “There are a few operators who aren’t so polite,” she said.
But problems also arise between mineral owners and drilling companies.
Trey Scott of Trinity Minerals Management said that mineral owners generally are excited to be approached by oil and gas companies, but want access to data and information about production. “Transparency goes a very long way to building trust,” Scott said.
But there’s so much production that the sheer volume of work, turnover at oil and gas companies, and the sophistication of operations means that it can be difficult for companies to stick to the terms of a minerals lease. “It’s an overwhelming task for the industry to try to keep up with all this,” Scott said.
Teddy Carter, president of the Texas Independent Producers and Royalty Owners, said the pace of drilling means the mineral owners themselves also have to get up to speed quickly.
“The rise of the Eagle Ford means we have lots of new royalty owners,” he said. “Some of this stuff is just too complicated for Joe Q. Citizen to handle without legal help.”
The drilling spree also raises questions for landowners about the abandonment of existing wells.
Ben Sebree of Austin’s Sebree & Tintera said that as of August 2011, there were 7,800 abandoned wells across the state. A bill passed in 2009 should reduce that number because it requires companies to plug inactive wells and clean up the surface. Even if they can justify not plugging the well, companies still have to clean the land.
“It requires operators to either fish or cut bait,” Sebree said.
Colin Lineberry, attorney with the Railroad Commission, said that all but about 125 companies have come into compliance with the new law, and he’s expecting another wave of compliance soon. Companies that don’t comply by the end of October risk losing the ability to operate in Texas.
“I expect we’ll have a big burst in compliance just before Halloween,” Lineberry said.
Eminent domain also continues to be an issue with pipelines, with a Beaumont-area case, Texas Rice Land Partners Ltd. and Mike Latta v. Denbury Green Pipeline-Texas LLC, driving the discussion.
In that case, a Texas Supreme Court opinion in August 2011 made clear that landowners can challenge in court whether a pipeline is a “common carrier” — one that also moves product for other companies — or is a private line, which wouldn’t have eminent domain rights to take private property.
Thousands of miles of new pipeline are needed, and attorneys for industry groups worry the decision means that they might have to fight — and refight — eminent domain battles along the entire length of a pipeline.
Phil Gamble, an attorney who represents pipeline companies, wants the Legislature to give the Railroad Commission the authority to determine common-carrier status. “Our energy policy can’t be set by the slowest court in the state,” he said.
Regan Beck, associate general counsel with the Texas Farm Bureau, said the Denbury decision was a good one.
“Our main concern is that private property owners are treated fairly and their rights are respected,” he said.